How to calculate buy and hold return

Learning to calculate the returns on your investments will improve your financial management skills. (Pennies on the Dollar - one dollar bill with pennies. image by Andy Dean from Fotolia.com)

In investment, the "buy and hold" strategy refers to buying a financial asset and holding it for a long period of time as its value appreciates. You can calculate the return on such an investment only when you have sold the asset and can compare how much you invested in it--its cost basis--to how much you sold it for. The returns on investment in such cases are simple to calculate and usually expressed as percentages.

Gather the data about your investment, particularly its cost basis and how much you sold it for. For example, consider an investment where you purchased stock for £13,000 and sold it several years later for £22,750.

Subtract the cost basis from the sale price to calculate your profit on the investment. In the example above, the calculation would look like this:

Profit = £22,750 - £13,000 = £9,750

Divide the profit by the cost basis and multiply the answer by 100 per cent to calculate your final return on investment. In the example, the calculation would look like this: